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THE PESO surged on Monday as the dollar fell on dovish US Federal Reserve bets.

The local unit closed at P56.33 per dollar on Monday, strengthening by 24 centavos from its P56.57 finish on Friday, Bankers Association of the Philippines data showed.

This was the peso’s best finish in over two weeks or since it closed at P56.21 against the dollar on June 13

The peso opened Monday’s session slightly stronger at P56.54 against the dollar, which was already its intraday low. It climbed to as high as P56.25 versus the greenback during the session.

Dollars traded rose to $1.82 billion on Monday from $1.57 billion on Friday.

“The dollar-peso closed lower on renewed dovish Fed bets after the release of US PCE (personal consumption expenditures) data last Friday,” a trader said by phone interview.

Improved risk appetite amid the ceasefire between Iran and Israel and hopes for a similar truce in Gaza also continued to boost other currencies against the greenback, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.

For Tuesday, the trader expects the peso to move between P56.40 and P56.80 per dollar, while Mr. Ricafort sees it ranging from P56.50 to P56.75.

The dollar slid on Monday against the yen and was pinned to its lowest in almost four years against the euro, as market optimism over US trade deals bolstered bets for earlier interest rate cuts by the US Federal Reserve, Reuters reported

The dollar also languished near a four-year low against sterling and a trough of more than a decade versus the Swiss franc after the White House neared a deal with China, while Canada scrapped a digital services tax to restart stalled talks.

Investors interpreted Fed Chair Jerome H. Powell’s testimony to US Congress last week as dovish, after he said rate cuts were likely if inflation did not spike this summer because of tariffs.

Bets for at least one quarter-point reduction by September have risen to 91.5%, CME Group’s FedWatch Tool shows, from about 83% a week earlier. The Fed’s rate-setting committee also meets next month, but does not gather in August.

A string of data reports are expected out of the US this week including a key jobs report that could influence market expectations on what the central bank’s next move might be.

An additional weight on the dollar came from US President Donald J. Trump’s continued assault on Mr. Powell, after the US president said on Friday he would “love” it if the Fed chief resigned before his term ended in May.

Mr. Trump also said he wanted to cut the benchmark rate to 1% from 4.25% to 4.5% now, and reiterated that he planned to replace Mr. Powell with a more dovish Fed chairperson.

Investors are also keeping an eye on Mr. Trump’s massive tax cut and spending bill now facing the Senate, which could add $3.3 trillion to the national debt over a decade, the Congressional Budget Office has estimated.

The dollar index, which measures the US currency against six major counterparts, is on track for its biggest drop in the first six months to a year since the era of free-floating currencies began in the early 1970s. 

The index was last flat at 97.183, staying close to its more than three-year low it hit last week.

The dollar slumped 0.4% to 144.11 yen, while the euro was little changed at $1.1723, not far from its highest since September 2021 it touched last week. — A.M.C. Sy with Reuters